David Jones
’ online sales have tripled and the number of customers shopping online have doubled since the retailer quietly started testing its new web and mobile stores last month.

The rapid acceleration in online sales during beta-testing highlights the potential for new channels to drive incremental sales and earnings growth for the 174-year-old retailer, a self-confessed online laggard.

David Jones’ online sales are less than 1 per cent of total sales, but chief executive
Paul Zahra
is aiming to lift online sales to 10 per cent after replacing a 12-year-old legacy e-commerce system with a fully integrated “omni-channel" model featuring new web, social commerce and mobile stores backed by a new fulfilment centre and warehouse and order management systems.

David Robinson, head of omni-channel strategy, says David Jones has done “six years’ worth of work in six months" laying the foundations for an e-commerce system that can be scaled up and improved over the next few years.

“We’re really pleased with where we’re at -- it’s not the finish line but we’ve got to the starting line and we’ve come a long way in a very short period of time," Mr Robinson told TheAustralian Financial Review in an exclusive interview ahead of the official launch on Wednesday of the new web and mobile stores and a David Jones magazine app.

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The retailer has increased the number of products it sells online from 9000 to 80,000 and another 10,000 products will be added before Christmas.

Over the next six to 12 months the webstore will be improved to include product ratings and reviews, videos and express delivery options as well as the capacity to collect online purchases in-store. Customers will also be able to buy through hyperlinks on the company’s Facebook page.

The biggest transformation, however, has occurred behind the scenes, at David Jones 26,500- square-metre warehouse at Silverwater in Sydney’s west.

More than half the site is now dedicated to e-commerce, including a photographic and production studio operated by digital partner Mondo and a 15,000-square-metre fulfilment centre, where goods are picked for online orders and packed in specially designed gift boxes that feature the company’s houndstooth logo.

IBM’s Sterling Commerce order fulfilment and warehouse management system helps pickers find the most efficient routes to more than 75,000 storage locations on 8.5 kilometres of shelving.

All order slips, products and locations are bar-coded and hand-held scanners prevent pickers from selecting the wrong products.

The investment in omni-channel retailing is expected to account for a sizeable portion of David Jones’ $80 million capex budget this year.

However, David Jones hopes that incremental online sales will be more profitable than bricks and mortar sales over time because of lower rent and labour costs.

US retailer Nordstrom now generates 10 per cent of sales but 25 per cent of earnings online, while
Myer
chief
Bernie Brookes
says profit margins on online sales could be twice those on bricks and mortar sales. “Selling stuff on the internet is actually more profitable for retailers and will be for us as we get significant scale on line," Mr Brookes said this year.

David Jones has tried to avoid duplicating costs by ensuring that buying, marketing and operations teams work across all channels. Products are “master-filed" once, whether they’re destined for the bricks and mortar or web stores, to minimise double handling.

“The feedback we’ve got to date has been great," says Mr Robinson, adding that online sales have risen three-fold and customer visits two-fold in the past three weeks with no promotion of the new sites. “We’re well on the way to achieving our goals. But this is a journey that will last for the next three to five years."